At its meeting in Luxembourg on 14 June, the EIB's Board of Governors mapped out the future direction of Bank activity designed to give increased support to the objectives of the European Union and, in particular, to ensure discharge of the new remits handed down to the Bank by the Cologne European Council meeting (3-4 June 1999).

At the end of the meeting, Sir Brian UNWIN, President of the EIB and Chairman of its Board of Directors, who was presenting his last activity report to the Governors as his term of office drew to a close, stated that: "The Member States have congratulated the EIB on the unprecedented variety and volume of its activities last year in support of economic and monetary union and for the enlarged Union of the future. To support growth and employment in the EU, we are now positioned amongst the largest providers of risk capital funding in Europe and are becoming increasingly active in the human capital areas of health and education. We shall intensify these activities in response to the specific requests to the Bank from the recent European Council in Cologne.

We have also continued our successful proactive euro funding strategy. The Bank is now using its position as the largest non-sovereign international borrower to create a large diversified pool of the new currency through its Euro Area Reference Note (EARN) issuance programme.

As the biggest source of long-term funding in Central and Eastern Europe, we remain committed to strengthening development of the candidate countries. The Governors particularly welcomed the crucial role the Bank will play in the huge effort to be made for the reconstruction of the Balkans and the establishment of the special EIB Balkans Task Force."

Key topics discussed by the Governors are summarised below:

1. Special action in favour of employment

The Board of Governors noted with satisfaction the very rapid progress achieved by the Bank in supporting growth and employment within the Union by means of its Amsterdam Special Action Programme (ASAP), which has been in operation since October 1997 and is to run for three years. In the space of eighteen months, ASAP has resulted in loans totalling nearly EUR  9 billion being committed in health and education (4 billion for 28 projects or programmes), urban renewal (4.2 billion for 27 projects or programmes) and venture capital for innovative SMEs (660 million for 26 operations).

Venture capital for SMEs

With a view to building even more solidly on initiatives already taken to boost the equity of innovative SMEs, to making this a permanent feature over the next four years and also to extending such initiatives to other categories of job-creating SMEs, the Bank has now decided to:

  • double EIB funding for the European Technology Facility (ETF), managed by the European Investment Fund (EIF), from EUR 125 to 250 million;
  • double the reserve established to cover the risk associated with these venture capital operations, thereby increasing it from EUR 500 million to 1 billion, drawn from the EIB's operating income;
  • in principle, to allocate to this reserve in due course an additional amount of EUR 1 billion for the years 2000-2003.

Education, health and urban renewal

The rapid growth in Bank lending to these new sectors (EUR 8.2 billion committed in 18 months) prompted the Governors to call for these sectors henceforth to be treated as an integral part of the EIB's field of activities. This constructive move followed on from the earlier 1997 ASAP decision restricting the eligibility of these sectors for EIB finance to a period of three years and giving priority to projects located in assisted areas.

2. Trans-European networks (TENs) and environmental protection

The Governors recorded the fact that, in line with their decisions on ASAP in 1997 and the conclusions of the Cologne European Council meeting, approvals in these sectors had been increasing by more than 2 billion annually compared with the average for 1995-1996.

The Governors also took note of the Bank's efforts to support TENs undertaken as public-private partnerships (PPPs), the most striking examples being the bridge over the Tagus, the Øresund fixed link, the London-Channel Tunnel high-speed rail link (CTRL), Athens-Spata Airport, British motorways (DBFO Roads) and the road tunnels from Wartnow to Rostock and under the Elbe in Hamburg. The Governors called upon the Bank to continue these activities, taking full advantage of the scope offered under its "TENs Window, set up in 1994, to offer conditions tailor-made to this type of project in terms of specific financing packages, cost coverage of feasibility studies, prefinancing, grace periods and loan maturities. In this connection, they noted with approval that the Bank was involved in putting together financing packages for a number of major forthcoming PPPs, including certain Portuguese and Italian motorways and the Dutch section of the PBKAL high-speed rail link.

With regard to the priority TENs, the Bank stated that it was prepared to take part, as happened in the run-up to the Essen European Council meeting (December 1994), in defining a revised approach to priority communications and energy transfer TENs. The EIB, which is already Europe's leading source of bank finance for the TENs and related infrastructure, with nearly EUR 60 billion committed since 1993, is able to give the EU Member States and institutions the benefit of its considerable experience in this sector in terms of assessing priority economic requirements and the financing capacity of the banking sector or evaluating technical specifications.

In line with the conclusions of the European Council meeting, the Governors endorsed an increase in Bank activity in support of high-technology TEN projects. The EIB has been backing the modernisation and extension of advanced telecommunications and multimedia services since 1994 in 13 EU countries through loans approaching EUR 10 billion (4.5% of the total investment in this sector). It therefore has the necessary qualifications and financial resources to underpin projects ushering in "intelligent transport systems (ITS), in the areas of electronic road traffic management and satellite-based navigation management, such as the "Galileo project, which is already being discussed by a working party comprising representatives of the private sector, the Bank and the Commission.

The Governors were also gratified to see that environmental projects accounted for a substantial proportion of the Bank's portfolio, with more than EUR 30 billion invested over the past five years, accounting for 28.5% of lending. In this context, EIB finance for renewable sources of energy (EUR 890 million for projects worth EUR 5.4 billion in all and centred on the production of 6.4 MWe) will be increased in the light of the commitments entered into under the Kyoto Protocol on Climate Change (December 1997); thus, in addition to wind, geothermal and hydroelectric power, other sub-sectors such as biomass, charcoal or solar energy will be eligible for increased support from the Bank.

3. Task Force for the Balkans

The Board of Governors expressed the wish that the Bank be actively involved, in its capacity as the Union's financing institution, in the considerable efforts needed to reconstruct the regions devastated by the conflict in the Balkans.

Called upon to play a decisive role in giving practical effect to Union's plans to help rebuild this region, the EIB will be a leading player in the work of the Agency set up by the EU to coordinate management of Community aid for the Balkans. In addition, the Governors endorsed the establishment by the Bank of a "Balkans Task Force" within its Department for Lending Operations in Central and Eastern Europe. Consisting of an experienced team of loan officers, economists and engineers, the Task Force has the job of identifying infrastructure that needs to be rebuilt as a matter of priority in the transport, telecommunications, energy and environmental sectors by means of EIB financing provided at short notice; it is also responsible for coordinating with EU and other international financial institutions and for defining bespoke financial instruments specifically designed for individual projects.

In view of the urgency and extent of the challenges facing this region, the EIB considers that its assistance should initially take the form of soft loans financed in whole or in part from Union or member countries' budgetary resources. Such an arrangement would make it possible to provide particularly favourable financial conditions in terms of interest rates (of the order of 1%), very long maturities (30 to 40 years) and grace periods. The Bank, which has managed such facilities in the past in Africa and the Mediterranean, has entered into detailed discussions with the Union and its Member States in order to come to a rapid conclusion on this aspect of its assistance.

The EIB has been active in the region since the late 1970s, with loans totalling some EUR 600 million already granted for infrastructure projects in particular. Its experience will enable it to make a rapid contribution towards evaluating and financing projects vital for the resumption of economic activity and for anchoring the countries concerned to the Union in a context of a return to peace and stability. Under current mandates, the EIB is already operating in Albania and Former Yugoslav Republic of Macedonia and has recently been involved in reconstruction of Bosnia-Herzegovina. The Bank is also playing its part in the donor conferences (G-24) and in defining the Stability Pact for South-Eastern Europe entered into in Cologne on 10 June, in the presence of the EIB President.

4. Stepping up operations paving the way for accession

The Governors were pleased to note the substantial effort made by the Bank in Central and Eastern Europe, where loan commitments have totalled more than EUR 10 billion since 1990. With EUR 2.4 billion granted in 1998 in the applicant Central and Eastern European countries and Cyprus, the past year was one of unprecedented growth (+54%), due in particular to the successful launching of the Bank's pre-accession facility, established by the EIB from its own resources and at its own risk. This totals EUR 3.5 billion, covers the period 31 January 1997 to 31 January 2000, and supplements the 3.520 billion mandate due to expire in the year 2000.

In line with the conclusions of the Cologne European Council meeting, the Governors approuvé noted with approval the principle of renewal, with effect from 31 January 2000, of the current pre-accession facility for the period 2000-2003 and beyond, with an amount which is likely to be substantially higher.

Finally, the Governors confirmed their full support for rapid renewal of the Union's mandates for the Bank's traditional activities in the Mediterranean, Central and Eastern European, Latin American and Asian countries and South Africa, in order to preserve the continuity of EIB operations in support of Community aid and cooperation policies. These mandates are expected to total EUR 9.475 billion for the period January 2000 to July 2003, including 4.725 billion for the Central and Eastern European countries.

5. Contribution to the euro market

The Governors took a very positive view of the role played by the Bank on the capital markets in promoting successful introduction of the euro. With borrowings of 30 billion in 1998, more than half of which in the form of euro-denominated or euro-tributary bonds, the Bank played a crucial part in opening up and diversifying the euro market and establishing a substantial "critical mass of instruments denominated in the new currency. Furthermore, in March of this year the EIB unveiled a new mechanism for issuing benchmark bonds in euro - the "Euro Area Reference Note or EARN - providing investors with liquidity, transparency and a regular stream of issues.

6. Accounts and balance sheet

On the basis of a report from the Bank's Audit Committee, the Board of Governors also approved the Bank's accounts as at 31 December 1998. With a total of EUR 176.4 billion, the EIB's balance sheet showed a net increase of 12.3% at the end of 1998; outstanding borrowings amounted to 123.8 billion and outstanding loans to 155.6 billion. These data should be seen in relation to the Governors' decision, adopted on 5 June 1998 and effective as of 1 January 1999, to increase the EIB's subscribed capital from EUR 62 to 100 billion, thereby raising the statutory ceiling on outstanding Bank loans and guarantees to 250 billion.

The EIB was set up in 1958 with the remit of financing capital projects furthering the objectives of the European Union, in particular regional development, trans-European transport, telecommunications and energy networks, industrial competitiveness and integration, SMEs, environmental protection and energy security. It also operates outside the Union within the framework of the Community's aid and cooperation policies, which apply to more than 120 countries worldwide. The EIB, whose shareholders are the Member States of the Union, raises its resources on the capital markets (by issuing AAA-rated bonds). The Board of Governors, the Bank's supreme decision-making body, consists of one minister per Member State, usually the Finance or Treasury Minister.The European Investment Fund (EIF) is a public-private partnership established in 1994 by the EIB, the European Community and public and private financial institutions from all 15 countries of the Union. Trans-European networks and SMEs are the two categories eligible for EIF credit guarantees and initiatives to increase the creditworthiness of enterprises or bodies wishing to finance their operations through borrowings. Set up to act as a catalyst, the EIF pursues a remit of facilitating private capital participation in TEN projects and SME access to loan finance. It is also involved, as an investor managing EIB or Community budget resources, in venture capital finance.